tv Bloomberg Markets European Open Bloomberg December 23, 2016 2:30am-4:01am EST
don't start a war you know you're going to lose. finally you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. >> good morning. welcome. you're watching bloomberg markets european open. it is going to be a busy one ty today. i'm guy johnson alongside matt miller. he is in berlin. this is what we're watching. sigh of relief? have any banks ever been happier with a 10-figure fine? but barclays is fighting back. hey refuse to accept the
d.o.j.'s order and take it to court. bank bailout. paschi will be the first to you'd use it. who if anybody will be next? matt? matt: we are les than an hour from the european market open. less than half an hour, i should say. 29 minutes. it is going to be an exciting day because of all of this bank news even though most are already, where do they go? san anton? futures up across the board. down days in asia and a down day in the u.s. we didn't hit that 20,000 mark on the dow yesterday but we're not too far off of it period of time what do you see on the g & m? guy: there was concern, maybe
the caribbean holiday a better option. the dollar down by less than 1/10 of 1%. not a lot of gray here. not getting a great deal of price action, pretty much a calmed market. most people are already heading off on their holiday. in terms of the equity markets yesterday t. interesting to see what happened in the nordic markets. the finnish market was moving yesterday. greece. keep an eye on greece. the political story is beginning to ratchet up a little bit in greece. maybe one market we should be paying attention to this 2017. let's get a bloomberg update. >> chancellor angela merkel says germany won't give up no islamist terrorism. she voiced hope that the terror florist the attack ould be caught soon. president-elect donald trump
said he asked bowing to price an upgrade of the f-18 that could replace lockheed mart &en's f-35. it is intended to be the mainstay of the air force, navy and marine corps. development is a decade in the works. the presentation included scenarios of how public finances could involve through 2020 after being hurt by two years of low oil prices. saudi energy minister said local energy price also rise. >> 2017, i cannot specify the date but it will not be late in 2017. we'll do it soon enough. >> global news 24 hours a day. this is bloomberg. guy? guy: thank you very much
indeed. deutsche bank has agreed to a $7.2 billion settle with the u.s. justice department over the sale of mortgage-backed securities in the run-up to the financial crisis. the deal bookends a year-long dodge investigation. -- d.o.j. investigation. credit suisse has followed suit this morning agreeing to pay $5.3 billion to resolve its mortgage bank securities probe. michael, let's start off with deutsche and credit suisse. deutsche in particular. needed to get it done. needed to settle it as it were. this is a critical piece of his 2016 campaign. >> yes, he talked a lot about 2016 being the peak restructuring year and this being the biggest piece of
that. you have to get it done with within the year to accomplish that. i think they just wanted the overhang to be over. this is, you know, several months we have been talking about this hit and whether it would lead to a capital raise. at least they have the question of the number out. guy: for both credit suisse and deutsche, we now know the down slope when it comes to litigation? >> this was the biggest b.e.a. piece but i think the tail is going to be bigger than we thought. there is a number of things still outstanding that have some volatility to them. we had things recently continue to pop up. i think you'll see a few more years of this continuing but not to the same scale. matt: michael, we saw you flash -- the civil penalties. not for the bigger numbers that include consumer
reparations. how do these numbers compare with the $16.7 billion fine in total that we saw bank of america gets. did they have also you know, a smaller number that they actually had to pay and a bigger number they had to make up through loan modifications? >> yeah. all the banks had a mix of the cash payment and the consumer relief. bank of america's cash number as lower than the 16.7 and you know, the cash is going to take the hip up front. the consumer relief, over a course of a few years. banks have some discretion how quickly they recognize that in their financial bs but certainly it will be a drag for a while. matt: didn't deutsche bank say it is not clear yet what the financial damage will be for the consumer leaf? >> yes, they said it would be
spread out but it is unclear what the exact amount is. in some of these cases the banks have written down some of these lopes already but haven't provided the relief yet and there is a bit of wiggle room how they deliver the relief. guy: why is barclays seeing it differently? >> i think without being in the room, there had to be have been a significant gap between what barclays was willing to pay. reporting was they woulded to keep it below 2 and what the d.o.j. was asking, barclays has maintained they were a smaller player in this market. every bank says we were small if this market when it comes to the investigations. certainly you know, there has to be a significant gap. banks historically have not liked to go to court. they don't like the drawn out nature of it and the potential volatility of having all of this drag through court and
not being in the driver's seat nd to the ultimate amount. matt: you wouldn't want to go to court if you didn't want certain things exposed to the public. it seems he feels he can risk opening up the books really for barclays to reporters like yourself. >> yeah. you have already seen the d.o.j. released a few emails from barclays, internal emails from barclays that don't look particularly good for the bank. there may be a bit of game theory here with the new administration coming in, perhaps takes a different view on to the severity of the fines and maybe barclays is willing to gamble on that. guy: banca monte paschi? we have asked that question so many times. >> now at least we know what they are going to do. we know that the private plan
has fallen short and that they are going to take state aid. the devil is now in the details into how much of the burden the bondholders are going to have to share. guy: let's bring you in on the fixed income side when it comes to financials. how does what we are seeing this morning affect the landscape for the bond side of the equation when it comes to the banking sector? >> i think it really helps to clear the air. if you think of all of these european banks, all of this hanging over them earlier this year, it looks like a lot of these banks are out of the woods because the worst is behind them. even banca monte paschi when you think of that. it is something that has come and gone. in term turnovers european banking landscape actually it looks in pretty good shape. you have a european economy growing and banks continuing to delever and a lot of these litigation concerns behind them. matt: what do you think about the capital requirements and goals that for example
deutsche bank wants to hit 12.5% by 2018. it is at 11 and change "bloomberg now." the more money -- and change now. the more money it has to pay, is the market going to be concerned about that when it comes to credit suisse or deutsche bank? >> no, i think when you look at a all of this, it is the direction that counts. when you look at all of these banks, with the environment of economic growth, they can earn more and retain more of those earnings so actually the trajectory is to hire capital buffers. if that takes a little longer the market will be fairly relaxed with that. guy: the market has priced some of these institutions with incredibly low book values. that is on the equity side. if you think they are out of the woods, how much on the fixed income side is there to move here? the market is priced so many of these institutions at zero
in historical terms. give us the head room there. >> when you look on the fixed income side, the subordinated debt. you're a little bit above equity in terms of the capital structure and when you look at a lot of those bonds you still have fairly good yields on them. you have the potential also for a fairly decent capital gain there. that is one of the -- that is one of the areas that investors should be looking for in 2017 that has been a beat in that part of the market and there is potential for performance there. matt: nick, you're going to stay with us. we're going to continue to talk about this. obviously so much banking news. michael moore is i'm sure going to run back to his desk and get cranking on some more reporting. great to have you with us this early, michael. with so much news coming out on deutsche bank and credit suisse. coming up, president-elect
donald trump asks bowing to price out lockheed martin's f-35. he looks to restructure government spending on military hardware. the russian president's annual press conference sees over 1,000 journalists vie for his attention. no personal inquiries allowed. we look ahead to what has become the mainstay of the festive season. saudi officials unveil the budget in the kingdom's history as they look to end the addiction to oil and close the budget gap. all that ahead and more. this is bloomberg. ♪
matt: welcome back to the european market open. just 15 minutes to go until stocks start trading. there is a ton of news out on banks today from barclays to credit suisse to deutsche bank to banca monte dei paschi. we have a lot to talk about and a lot to trade on. first off let's get to the bloomberg business flash. >> matt, thank you. deutsche bank said it reached a $7.2 billion agreement to resolve a years long u.s. investigation into its dealings in mortgage-backed securities. they will pay $3.1 civil penalty and the remainder will provide relief to consume rs.
credit suisse agreed to pay $5.28 billion to resolve a u.s. probe into its mortgage-backed securities business. the bank said it will pay $2.48 billion civil berment the remainer to consumer leaf. the obama administration has been pressing to wrap up investigations of wall street firms that helped fuel the 2008 financial crisis. the u.s. justice department sued barclays for fraud over its sale of mortgage bonds. they said investors were deceived about the risk of the securities. they rejected the government's accusations and saved said they will vigorously defend the complaint. guy? guy: thank you. we have some data breaking out in france this morning. the final g.d.p. for the third quarter has come in at 1%. .1%. not a great number. could be worse.
could be a lot better. of course france is going to theyont and center in 20 will choose new leaders in france, germany. particularly in greece. concentration on the ballots. it is the employee probability he pen. of marine le pen ch >> when you look at opinion polls they are hugely underestimating the french election. that was very much the lesson. guy: why do you think that? because of what we have seen this year? >> i think it is, yeah. when you look at this year, opinion poll have said consistently wrong. i think part of it is that pollsters, when people go to pollsters, they don't give the
right answer. that is the big potential impact when you look at european -- next year. matt: before donald trump was elected president, literally every single thinking person we had on television said if he won it would be an absolute disaster for markets. then obviously we have a massive rally in equities. nobody needs to hide in safe haven trades after the election and all expectations are for a reflationary policy that leads to growth. obviously the proof is in the pudding. we're not there yet, but could you see the same kind of reaction in the kind of gray swan event of a la pen victory? >> that's what we saw with brexit as well. a lot of these things excite only then to disappoint. ultimately the lesson with all of these political events is go back to basics. go back to basics and look at
the impact in terms of growth and inflationary expectations on the economy. when you do that, that's what the market comprises because that's something that is very, very tangible. guy: this is different, though. f le pen wins, you could price in the euro. >> you could. that is a tale that has been written over many, many years. but again, remember with le pen winning, the other part of that is that she would be unlikely to control the french assembly. you need both bits in terms of getting laws through. so you could start to price that and maybe things like french bonds would start to price -- guy: this is -- we're turning on the spread. how much wider does that go into the poll? >> that could easily double. a spread of 90 basis point purchases you think to have
road map there, look at the performance of the italian bonds in the runup to the italian referendum. that is the kind of magnitude in terms of underperformance you could expect from france. matt: nick, you're going to stay with us. c.i.o. from jpmorgan chase. we are minutes away from start of trade. financials very much in focus for european markets this morning after two settlements with the d.o.j. deutsche bank and credit suisse. one lawsuit, barclays and one ongoing italian job with banca monte dei paschi. this is bloomberg. ♪
matt: welcome back to the european market open. i'm matt miller live in berlin. there you see the finished work of what the building that we saw yesterday. we saw the installation of this because hanukkah starts tomorrow. on the same day as christmas eve. right from front of the brandenburg gate here in the capital of germany. let's get to your stocks to watch now. there is so much going on in the financial space this morning. deutsche bank is one to look at after it was the first out this morning with its settlement with the d.o.j. $7.2 billion was the total number there.
$3.1 billion a cash neament they are going to have to pay straight away and then the rest will come in consumer relief. caress sweet was out as well with a settlement. $5.2 billion. $2.8 billion is the cash penalty that credit suisse has agreed to pay. the rest will come in consumer and community relief. watch those two stocks. investors are going to be happy to have this behind them as they go into 2017. guy: and a lower number which is going to be well received as well by investors. barclays decided to take a different action. they are going to head to court in the states against the d.o.j. they have employed some fairly pushy lawyers. they fought some big cases. it is going to be interesting to see how this one goes down. paschi is not going to open today just after news last
night that it is going to avail itself to the new facility provided by the italian authorities. we're not going to get any details coming gnu through in terms of the share trading on paschi. after the share destruction that we have seen, i'm not sure they are guided in terms of what is happening in terms of investor settlement. you're likely to see that in the credit. i don't have a -- on what is going to happen in interprets of the credit today. how that is going to trade. in termsor european equities, i think you're are going to see a firm focus on the banking sector this morning where you'll likely see some of your output today in terms of the performance again, i think fixed income, credit is going to be as important as equities today. an awful lot of trading in that space versus where we'll see the equities going. we're watching as well what's happening on the political as
♪ guy: christmas eve, welcome to the markets european open. here in london. in berlin. the start of european trading. your morning brief with matt. matt: a sigh of relief this morning. deutsche and credit suisse have agreed to settle with the u.s. justice department. have any banks ever been happier with a 10 figure fine? barclays fights back. the british bank refuses to accept the doj's offer and takes its chances in court. will the new trump administration take a more sympathetic stance? bailouts in italy. the country confirms a 20 billion euro cash lifeline for
banks monte dei paschi will be the first to use it. who will claim the lifeline next? guy? a look at take markets and see where they are going. banks firmly in focus as we move towards the open. we will see where we go. -- up. 7065, let's see how barclays is trading. details in a moment. deutsche going to be front and center as well. banks gaining, no names yet on my list. we will come back and show you those numbers in a moment. manus? is going to be about the banks. french gdp, german consumer confidence, refineries for the third quarter in the gdp.
but, betting on three months forward on where will fall go in q4. that has not collapsed by the same aggression you have seen in the cash market. 5% versus the cash market dropping by 31%. volumes today are probably going to be less. various prices, deutsche and banca monte dai paschi. like as something you quite often. as you can see, the white line, monte dei paschi no move at all. deutsche bank passing through the eye of the storm at half the price. the question is, are we through the worst? will you see a repricing of bank stocks with a steeper yield curve in 2017 on both sides of
the pond? what will that do to price? pier 3 stocks and more to watch. happy christmas. >> happy christmas. i am watching the banks here. i was hoping deutsche bank might have started to move. we will see if that shifts. we are looking at deutsche bank reaching a 7.2 billion dollars settlement for credit suisse, a $5.3 billion. for deutsche bank, that number coming lower than the 14 billion, the opening request of the u.s. doj. loseght see deutsche bank a little higher when it finally starts moving. we are seeing credits we smooth higher, still up by 1.7 percent at the moment. the people i have been speaking to generally seem to think it is pretty good news for deutsche bank and credit suisse. barclays, edging into negative territory. suing barclays for fraud over its sale of mortgage bonds.
there we go. .eutsche bank opening up 4% we will keep up with italian lenders as well. matt? matt: joining us on the phone to talk about all of those banks is chris wheeler, bank and list -- analyst. very happy to get some of your time this morning. you must be busy. you areirst ask if surprised that barclays is willing to go to court rather than pay a fine? >> good morning. barclays -- they bought lehman brothers in the middle of the crisis and i am wondering if this is all about the fact that some of the issues the doj are dealing with is lehman brothers issues. manages saying we didn't the bank until we acquired it in 2009. maybe theyising, but
think the number is ridiculous. this could end up in a settlement, rather than going to court. let's talk about where this leads both credits and the equity side when it comes to deutsche bank. john cryan needed to get this done by 2016. 2017 being aut downslope. how gradual is that downslope because of the litigation risk that deutsche now faces? are we over the worst? >> i think we are. this week, goldman sachs for $150 million for manipulating in the unitedndex states. i said to my sales team, that is a lot of money. but if we look at back in terms of what we have seen in litigation, we are starting to -- see the payoff here.
plenty on the play for their lawyers teams. but nothing like we have seen today. guy: how does the market price that? christopher: to say we have got away from the emergency issue funding, whatever, that would have been necessary if it would have been 14. it was a postulant position by the doj. you can start to look at earnings. you can start to look at earnings that reflect the new strategy of john cryan without the overcame -- overhang of litigation. it comes back into normality, which is what they want to happen over the next few years. matt: isn't 7.2 billion for deutsche still a pretty ridiculous number am a relative to the 16.7 billion bank of america got? less than twice the amount even though they were doing four times the volume?
christopher: we had some weird settlements. settling,edit suisse all the noise over ups, they for 600 million. credit suisse is far less active. years. four or five i don't understand the logic of all this. it seems there has been inflation. better to settle early than late. matt: you don't think it has to do with the nationality of the bank? it seems the foreign banks are getting hit harder than the u.s. banks got at the beginning. i think you have to look at the nitty-gritty of the deal. i don't know how bad the quality was of the assets deutsche put into their own. it was particularly grievous in terms of the way they behaved, but you are right. but you know something?
i haven't heard any talk of all these telephone -- terrible things, aren't they awful? i think that story has gone away because people want to put this massive issue behind them. we still have volatility in this market, and that is one big settlement to come. guy: we will keep an eye on what is happening there. i am looking at trading this morning. , 2.3% tok of scotland the upside. rbs doing well and trading on the back of this. if i'm a client of deutsche bank and thinking about my banking relationships in 2017, how big an impact will this have on my thinking? christopher: that is a difficult one. deutsche has some very loyal customers. they have been there for those customers a long time. they are a major european investment bank.
they are seen as important. this just helps anybody who is going to have a debate at the table to say, do we still want to do this? this is out of the way, it is about what is in here for these guys, because they can focused on disposing of post-bank. they can really show what they are capable of in terms of business, which is a leading player in the capital markets. isn't it a little early to breathe a sigh of relief? what you bank has to deal with the alleged fiction -- fixing of prices in the middle market. the russian transfers. civil suits for investors. there is still a big legal bill ahead of them even though they have agreed to $16 billion in fines including the $9 billion they have already paid.
this $7.2 billion settlement. 12.5%till want to hit tier one common equity by 2018. it seems like blue do much work. it seems not doable. the settlements at the moment that are being suggested for those offenses are not as sizable. if it would have been $14 billion, it would have been a capital issue. the good news on this one is the got it out of the way. it is going to hurt them, but they are going to be earning money in the first quarter next year and doing quite well because capital markets have come back nicely. john has the chance to earn his way out of this. if another 500 million, he could earn his way out. he could take this --
you are right. it is not over. to this is one big issue have out of the way that allows him to contemplate on the business as well as other legal matters. willdo you think this emboldenteach him -- them? this is something that has been hanging over them for a while, they want to get it nailed down, they've got it nailed down. 2017, they are going to wrap it up even more? christopher: i am more skeptical on this one. a bit higher than i expected, this settlement. they got it out of the way in the third quarter. but it is out of the way. i don't think anybody had any concerns about the capital positions. it would have been annoying to happen. taking up his time, though? christopher: it probably has.
it seems to me still, the strategy his fault -- trying to follow, we know what he wants to do. i'm not sure what he wants to do with the rest of the business. he concentrates on his swiss pieces substantially. this is out of the way, but he still has a lot to think about. i think john has laid out a clearer path as he has more problems to deal with yet. you are right, again. down with his lawyers once a week and talk through this issue. what time, that time you can spend with clients and management, you can strategize and make sure everyone is on board. you can make sure you are engaged with the level of detail you need to be. part of what we have been haveng is that these guys -- as you say, they have to spend so much time dealing with awayand it has sucked time
from the management of a business that, in some ways, still doesn't have a profit model that works in europe. validopher: that's a point. looking at credit suisse, people forget that with john cryan, his issue is talking to big corporate clients. its very important that he is out there talking to the wealth management class. they like to talk to the ceo. that is the core business of credit suisse. not in investment banking. investment banking adds some gloss to it and provides products, but for him being out in front of those wealthy individuals keeps him an opportunity to boost the business. i want to come. to my first question on barclays. we see shares down as investors aren't breathing the same sigh as they are for john cryan. are you excited as an analyst,
as i am as a journalist, about seeing this case go to court? christopher: that is an interesting one. we would all like to see that. we discovered that a lot of settlements take place on the steps of courts because people don't want to go into the publicity. so they are choosing to be aggressive is a mystery to me. scale, why the stocks pushed down, the doj is coming with a bigger number than they thought, or i wondered about this link to lehman brothers. january 2009 is when they closed the acquisition of the u.s. business. settle on theill steps or somewhere way off of the steps. guy: great to see you. thank you for sharing your time with us this morning. this wheeler, bank analyst. the m.r.i. function to see
things happening. deutsche up new the top. rbs having a good day. credit suisse rising. union credit up. that is were gains are. i wonder if what we are seeing is money rotating out of hsbc. you saw it earlier with ubs as well earlier. have people are saying we been hiding out in hsbc, we can start rotating some of that money around and putting it back to work in the likes of the names of deutsche. matt: very interesting to see that rotation and we will continue to keep an eye on these things -- banks, because what a fascinating day of news for the financial sector. also in the political sphere, our geo political sphere, 24 hour's and trump land is a long time. he was back on twitter weighing in on some key issues. first in reference to a you and resolution that would have ruled
israeli settlements in the west bank illegal under international law. , thedent-elect tweeted resolution being considered at the united nations security council regarding israel should be vetoed. then four hours later, another tweet. the united states must greatly strengthen and expand its suchar capability until time as the world comes to its senses regarding new. -- nukes. based on the excessive cost of the lockheed martin f-35, i have asked boeing to price out a comparable f: 8 -- f-18. let's start with the least dangerous tweet there. you know a lot about planes. the f-18 is a little dated. this he expect going to come up with a comparable plane to the f-35 project in development for a decade? guy: it will be hard for it to
deliver on the radar. honeywell hee should be looking at here. these kinds of companies put the kit inside the airframe. here hasthis aircraft been around for a while. the radar, stealth technology stuff is hard to retrofit. let's talk about nick -- with nick about core asset management. its talk about treasuries this time next year. where do you think we are this time next year. >> 3.5-4 percent. what drives it is the fed. rateed to be pricing for hikes next year, at least four. that goes back to when you look at the momentum forthat goes bak
at the momentum for growth and the momentum for inflation. significantly higher with the new political landscape in the u.s.. the market is not yet on that agenda. nick, does anything shop the markets here? when you start to talk about nuclear weapons and rebuilding your arsenal halle boardgames with matthew broderick -- isn't that a tipping point for the world that doesn't care about most anything geopolitically? isn't there some point when you say, i have to buy some government bonds again. maybe, but you need to see the facts on the ground. a lot of this is still just chatter. your ultimate drivers of government bonds go back to expectations. of growth and inflation. be higher as we look forward, not lower. you look at treasury yields. they are still almost at
emergency low levels. a need to be higher and will be a new year's time. out thans look further a year. when does the trump recession start? nick: this is the longest expansion on history, isn't it? the parallel here is that reagan period, when you had a debt fueled stimulus. ultimately what you get is exaggerated booms and busts there. we are in a boom now, when the bust comes it will be bigger. but that date of the recession is pushed out. you are looking at 2018-2019. something like that. all those measures in the interim help to underwrite credit risk. 2018-2019, something like that. guy: when does the fed start selling its balance sheet? already talk of reducing the u.s. balance sheet. it is a big seller and it depends on how they sell it.
but you get a seller in the market of that scale, is that just take your 4% and had 2%? not two, but the feds have talked before when you get the rate around 1%, that is up inou start to righten the balance sheet. maybe that happens in phases. first phase, you don't reinvest. then you actually so much later. enough, thating -- is more of a 2018 story then. i'm trying to find my chart of u.s.-german tenure spread. if we get the spread you're , booms under, 3.29 treasuries at the moment. where does that take us? how much of a gravitational pull bund market? nick: treasuries going percent higher than -- from here, boones
-- bunds less, but still higher. that is really driven by divergence. ultimately, the ecb have been crystal clear. they are not moving rates. that spread stays pretty wide as you look out. going to be ecb comfortable with european bonds rising? there is going to be a tightening of financial conditions, assuming the euro will have an effect, but not as big an effect. there will be a time of financial condition -- tightening of conditions as a result? nick: a weaker euro helps to loosen. rising markets are also beneficial. if bug yields are going up because growth is stronger, they are going up for the right reasons. guy: but we are talking about -- maybe trooper germany, but not for the other things. but it depends on
the credit spread, doesn't it? that environment where the credits read and contract. guy: thank you for coming to see us this christmas eve eve. nick gartside, thank you. ant, saudi arabia unveils ambitious budget in an effort to reinvent the economy. we spoke to the top ministers. that is next. this is bloomberg. ♪
♪ matt: welcome back to the european market open. 23 minutes into trading and the focus has been all about banks. i am going to shift over all that european -- i am going to shift over to a different geographical area and talk about saudi arabia. it has delivered its most detailed budget and economic shakeup in recent history. last night, four of the top officials spoke to bloomberg in , outlining some of the specifics on the budget and how they plan to reach a surplus by 2020. incentives.ssue we will issue internationally and locally. we are very likely to go to the market, but i can't give you the details. that depends on the windows in the markets. we are very comfortable with our cash flow. the three scenarios are conservative in oil price.
we have used multiple sources. -- energy.energy we have used the international energy crisis, we have used the top analyst average and combined it. we took a haircut to calculate most of the scenarios. slightly over the years it has buried, but generally conservative. >> in 2017, i cannot specify the day, but it will not be late in 2017. >> the 200 billion stimulus directly towards companies, saudi companies who want to expand their current business. very interesting stuff going on there in saudi arabia. obviously, deeply connected to the markets through the price of
oil. that kind of action. the market today in europe and probably later on in the u.s. as well, going to be really determined by what happens in the bank stocks. here you see deutsche bank up 4% after settling with the department of justice for $7.2 billion. much better than the $14 billion the doj originally wanted. credit suisse coming out with $5 billion in unchanged settlements as well. our clays will go to court -- barclays will go to court, their shares are down. guy: i think we are looking for that settlement to come to shortly. matt, we are almost there. christmas trees are well lit up. , we are going to run a health check of the economy six months after the vote to leave the european union. that is the christmas tree paul's saint halls, st.
♪ , you areome back watching the european open. how things are shaping up this christmas eve eve. bankingdriven by the stocks this morning. we're watching carefully to see what is happening with which a bank. credit suisse has settled, barclays hasn't. the italian bank still suspended. details of stock movers. >> got them all appears here so you can see the latest pricing. we are looking at with deutsche bank and credit suisse reaching settlements with the doj. $7.2 billion for deutsche bank, $5.3 billion for credit suisse.
credit -- investors liking that. deutsche bank has reached its highest level since march. both moving to a different story. for barclays, facing off against the doj. the justice department has sued barclays before over its sales of mortgage bonds. barclays rejecting the government's accusations. that stock lower here. in italian banks, monte dei paschi suspended today. we are seeing italian banks move higher among them, unicredit. it failed to secure its future by raising funds from investors and italy is going to pile as much into small lenders -- small kenders make -- may see lifelines soon. guy: this is the u.k. small cast. yesterday, a record. this is what is happening to the index right now. that leads in nicely to my next
segment. six months since britain voted for the brexit. business barometer reports that confidence has been resilient since the boat. easing in the labor market, this comes as consumer confidence has fallen to its lowest number since july in fear of a slowdown in rising inflation. are you surprised that business has well -- held up as well it is -- as it has? >> i wouldn't say surprised. we have been doing a series across the u.k. for the past months. the message i'm hearing is that businesses accept there is a lot of uncertainty out there. referendum,fter the but the backdrop is still relatively resilient. guy: do they feel they are in the sweet spot right now?
.f they are externally facing >> they have to plan, but at the moment, there is concern over how the negotiations go. at the moment, interest rates are pretty much at zero worried pound falling the best part of 15%. if you are a manufacturer, the fall in the pound is a big improvement in competitiveness. the labor market isvery strong. the unemployment rate in the u.k. is the lowest in years. matt: you see an opportunity for brexit., even amidst the in the anti-globalization climate that we see in the u.s.? can they reach out to trading partners that the u.s. may spurn? >> i think there is an
opportunity for u.k. companies. this is part of a very big secular trend in the shift of global growth. a big opportunity of u.k. companies over the next few years is to refocus. look at where the fastest-growing markets around the world are. the trump, the presidents in the united states will afford the u.k. to trademark correctly with the united states. the big opportunities are obviously china, india. and focusing on those markets going forward is where the big growth will come from. is it possible that markets aren't pricing in the loss of trade that is going to come with a hard brexit? from this side of the channel, when i talk to politicians, they take a pretty stern feared -- fear. to seet is too early
what impact of the trading position of the u.k. will be leaving europe. the negotiations haven't yet started to read we are going to see how they progress over the next couple of years. over a softculation brexit or hard brexit. until we have a clearer idea what our trading relationship is going to be, coming back to the earlier points, the next two years, the fall in the pound is a windfall opportunity. thereafter, we have to see how the negotiation will unfold. guy: how do you think a transition period will be received? inre is this concern financial services and other sectors about an abrupt change. do most businesses anticipate that we will see some sort of transition period input into place? nick: i don't know what investors are thinking, we have not asked businesses. there have been some suggestions
that theresa may accepts that it would be less disruptive for companies if there is a period to adjust to the new arrangement. on the basis that would make sense. equally, that also comes with a period of uncertainty as well. ofinesses want is clarity when the negotiating position is in the u.k. and europe. when they have that, they can adjust accordingly. >> do you think they will get that? is this going to be a transparent negotiation? i think the complication next year is the european political cycle. we have theresa may planning to trigger article 50 in march. the supreme court ruling next month to decide whether a lot of that needs to go to parliamentary vote. on top of that, we have the european elections on the table. we have elections in the netherlands and france and germany. an early general election in
italy. you have to think that the ability or likelihood of some of these european countries moving to compromise might not be particularly strong, which suggests to me that the negotiations won't necessarily start in earnest until the backend of 2017, early 2018. guy: what are the expectations in terms of hiring next year? nick: a slight softening coming through next year. as yet, it is unclear whether this is brexit or down to inflation. year, istory for next suspect, a rise in inflation, fall in the pound pushing up the school prices, squeezing -- >> markets will be squeezed question mark -- margin jewel be squeezed? >> i see the big squeeze will be in household pay. the bedrock of the economy this year. adam, thanks so much for your time this morning. this -- conomics
european market open. 40 minutes into trading. this is a live shot of the brandon bank -- brandenburg gate. -- hanukkah starts on a different day every year, that this year it kicks off on christmas eve. tomorrow will be the first day of hanukkah. as a result, that is to celebrate that. let's get the business flash. sebastian: deutsche bank set its 7.2 billion agreement to resolve an investigation into its dealings in mortgage assets. it will pay 3.1 billion dollars civil penalty and provide relief to customers. 5.2it suisse agreed to pay $8 billion -- $5.2 billion. the bank said it will pay a $2.48 billion civil penalty.
the u.s. justice department sued barclays for fraud over more it -- its sale of mortgage bonds. governmentjected the accusations and said it will vigorously defend the complaint. euros to bailg out the country's banks. the news comes after monte dei paschi failed to raise funds from investors. shares and bonds are suspended from trading today. volkswagen agree to settlement terms. ins covers porsche, audi, 2009. $1 billion to what the company agreed to pay regularly to the u.s. and canada. that is your bloomberg business flash. thanks for that. let's get to russia.
vladimir putin holds his annual televised press conference today. the leader will face questions issues from syria, to the incoming administration of donald trump. more than 1400 journalists are accredited for the event and it lasts hours and hours. with us now from moscow, the chief economist for russia and see i.s., renaissance capital. olaf, thank you for your time. what do you expect to be the most interesting aspect of this incredibly long, now celebratory annual press conference today? next year we expect russia to recoveryroad macro with growth and stable currency. seehere on the ground, we some increased optimism over russian growth prospects next year. the important thing would be whether the president , andights this happening
to get a good feedback from press that people are looking forward. does he typically get good feedback in this annual session? i mean, is it a congratulatory behind andthe year an optimistic look ahead, or will he get critical questions as to, for example, russia's support of bombing of aleppo. some critical things that could come from the budget side, the russian budget has not been adjusted to oil price. budget polls remain restrictive and some restrictive measures are needed further to keep the consolidation in the budget. the interesting point could be whether we see some discussion
on lower interest in state sellers. saw -- talkctive where both sides will enjoy the discussion. guy: you think he will be announcing how pleased he is with the russian central bank? it has done a great job, when you compare and contrast how russia has weathered the downturn in oil prices versus saudi arabia. the currency was allowed to take the strain. you think he will be talking about that today? expect that the president highlights the central 4%ks and they want to see inflation next year. indeed, russian central banks did extremely good job and this is one of the reasons why international investors consider russia their kind of safe haven in emerging markets right now.
that is really remarkable. banks arentral probably the best ones in the emerging markets, but the most predictable bank globally. for now, for international investors, the central bank of than evenmore clear the federal reserve. you think he will talk about how much of a relationship and how good a relationship he will have with donald trump? how do you think vladimir putin views donald trump? matt: we would expect to see some comment on that. the donald trump victory was an unexpected event, obviously. but before that, all international investments we always that relation. it was important for putin to
highlight that we are looking for improvements with relations with the west. matt: do you think we are going to get a look into possible collaboration or partnership say, russia and the u.s.? something unimaginable at the beginning of 2016? one would hope for this. still, institutions are quite strong in the u.s., and it is tough to make a strong call on u.s. officially easing sanctions on russia. what we would be looking for some resting of sanctions. us period of sanctions could lead to some opening of international markets.
this could be a big deal for russian markets next year. what is the big thing for russia next year question mark the oil price? oleg: not just oil. the adjustment of the economy to new oil prices firemen -- price environment. improvement,s some russian growth aspect would be looking better. this could come from the easing of sanctions regime. these are the most important things that international investors are looking for. matt: appreciate your thoughts on that. the chief economist for russia's renaissance capital coming to us from moscow. 2016, a year of
, live in new york. you see a picture of beautiful manhattan on christmas eve eve. -- that9,800 78 actually looks like a future. on the dow jones, let me pull it up. i promised. if we get 20,000, i am going to make hoodies. let's look at bank stocks. it is all about banks. deutsche bank and credit suisse both making settlements with the u.s. department of justice, agreeing to hand over $15 cashon, not all in obviously and not all right away. deutsche bank settling for 7.2 billion dollars. credit suisse for $5.2 billion.
barclays said forget about it. we'd rather go to court. barclays going to take their chances at a trial, although possibly a trump presidency will make that easier for them. still, the market doesn't like that uncertainty. it prefers to have things behind it. deutsche bank up 4%. let's talk about these charts we have been watching this year and the incredible ones generated. euro-sterlinghe cross rates, the miller johnson cross. before that, the cable rate. this is the cable rate. it is not working out for me. your -- newow in york, paid in dollars. nice. this is the cable rate, that is brexit. you can see what has happened. how much it is being crushed. pre-grexit -- pre-brexit, happy days.
122.65.re down 1 -- we will see how euro does next year on the miller cross. story on the terminal now which is worth reading. we have been talking to academics about how they seek next year progressing with hard or soft brexit. a are all on a hard brexit and getting harder. one said i put my mortgage on a hard brexit. one of the critical questions in 2017. matt: i agree. one of the most important charts of the year. what i have chosen should really be the chart of the decade, maybe. or of the last three. years of u.s.-china trade deficit.
it was already negative when this chart starts at the end of 1996. we were already buying more of their stuff than they were of hours, hours being the u.s.. the deficit has blown out by more than 1000% in the last 20 years. it never turns around. this is one of the reasons that donald trump has managed to win the u.s. presidential election and so many americans have been displaced from jobs. if you continue to buy stuff from somebody who never buys anything from you and that relationship just gets weaker and weaker for you to market is going to eventually cause problems, as it has for the u.s. economy. guy: absolutely. it will be interesting to see if that is the chart of next year for donald trump. the banks have been the big story today. in some ways, the big story of the year. matt: absolutely. go -- read goab
and looked to see with the most read story would be. i expected something about brexit or donald trump, the two big black swan events of the year. however, it is deutsche bank that toxic. this story from september. asan defends deutsche bank some clients pair back exposure. they had the strongest balance sheet they have had in 20 years. since that story came out september 30, shares were up 8% before they started trading this morning. now they are up about 12%. guy: for next year, this could be the chart watch. this is the france-german. how wide does that get next year ? as we have been hearing, low probability, high impact event. that is marine le pen. coming upeillance is
mark: a deal before christmas. budget night at credit suisse -- deutsche bank and credit suisse settled the mortgage probe. fighting charges, suggesting a bank is willing to take his chances with the trump administration. we have the latest. plus, the italian rescue job. the state will bailout monte dei 5schi as it fails to raise billion euros from the market. could other lenders follow? putin's victory